the greeks are not very useful for retail investors, as most will not be using them to hedge their risks. plus retailer's position is too small to be cost effective to do continuous hedging.
eg: say your delta position is +13. Are you really going to short sell 13 underlying to neutralize your risk?

can use options to cheapen your entry level... at least that is what I do...

the greeks are important... its just that retailers don't have much use for them. to FIs or fund managers, they are used to look at their overall portfolio risk(specifically for their market risk and senior management to know the positions the firm is holding).

an example.
Yeah, a option's delta is between -1 to 1. 0.5 delta on a call can be used to indicate how much "exposure" your portfolio value is to a small change in the underlying price. Say you have 1000 such call, that means you effectively have a exposure of 500 of the underlying.
To a trader or risk manager, to neutralize the risk, the opposite position is to be taken if they wish to. Ie, short 500 of the underlying.
As a retailer, would you be able to short 500 of the underlying? shorting comes with its own set of risks. You already wanted that position right?

I am just explaining to you what FI/portfolio managers use the greeks for. nothing more nothing less, as you indicated that you wish to know why the greeks are useful to institutions.

exactly as per your use, the greeks are not very useful to you right? you didn't even bother to look at your decay (theta)...

This post has been edited by Wedchar2912: Sep 17 2024, 07:50 PM

ok... no point getting agitated. good luck on your trading/investment.

This post has been edited by Wedchar2912: Sep 17 2024, 08:01 PM

May I ask.
Is this you selling naked puts (if you are non bearish) or naked calls on SPX index on the last hour of trading?
that's like 3am time here right?

This post has been edited by Wedchar2912: Sep 23 2024, 04:17 PM

you must have very decent risk appetite... the gamma effect is scary eh...

spx i would not dare since it is cash settled... but maybe i try looking at ur strategy using etfs or single stocks... not so scary for me.

if you are currently holding the underlying, you should not be that worried about getting called/exercised.

of course not naked pls... that is really scary.

I don't follow the strategy religiously... most of the time just the call side...

ie, for my stock investment position, i'll sell otm call options, usually 2 to 3 months tenor. basically just to collect around 6 to 12% pa premium while waiting for the underlying to appreciate. This way I also don't need to spend much effort to observe the position.
the beauty of this is if one has say 1 million ringgit exposure to the underlying, this gives me "free" 15K to 30K rm every 3 months for every 1 million exposure.

note: the stocks are originally my investment stocks, ie ones that i hold long term. So far so good, only got called once.

It all depends on your aim and "greed" level.

For me, selling the call is just to yield enhance the return of my stocks holding. That's why I choose 6 to 12% pa premium.... that can work out quite far away a strike vs spot as it depends on vol... a recent call i sold gives me around 8%pa, expiration in Nov and the strike is a good 25% away.

If one is greedy (nothing wrong with that), one can choose atm option or set at higher premium like 20 to 30% pa. Simply means higher chance of being called; giving away the upside.

The low premium is a point that deserves closer attention.
Premium low or high depends on one's point of view really.
Absolute no need to explain... 50 rm premium vs 5000 rm premium vs 20K rm.

But in % term, is 12% pa "extra" income high or low? 3% pa? 6% pa? I rather keep a decent upside while collecting 4% pa.

Have you traded options before, and if so, how much experience do you have?
I ask because a proper cash-secured put involves no leverage. But you mentioned BP (buying power), which suggests you might be planning to use leverage. (If I misunderstood, feel free to ignore the rest.)

Once you bring leverage into the mix, you need to be very mindful of mtm swings, which can cut deeply.

1 to 2% monthly (12 to 24% p.a.) is definitely achievable with CSPs, though on the aggressive side,but still reasonable. For example, if your notional (the cash secured part) is 100K, then you might expect 1 to 2K pm.

However, if you use leverage (BP is tied to your trading account), you could end up writing puts worth 1.5x, 2x, or even 2.5x actual capital. That can look attractive. For instance, at 2x, you could be making 2 to 4K RM on a 100K base, but it comes with significant risk: margin call before expiration.

So, if you go down the leverage route, you’ll need to monitor your positions closely, pretty much 24/7.

shorting one side is risky enough for me, I definitely won't dare to do a short strangle.

but to play play with small 1 or 2 contract positions, maybe can try that

Most important and damn good advice advocated by you.

May I add not too greedy also.
Like the earlier trade I mentioned. I picked 25% away call... Stock rallied yday almost 20.... If crosses the strike, I pocket the 25% up swing while already collected the 8%pa "income".

Hence must be on stocks one already invested or intend to invest.